Eight months after the megamerger was first announced, the $11 billion acquisition of Tatts Group Limited (ASX: TTS) by Australian gambling giant, Tabcorp Holdings Limited (ASX: TAH) has been approved by the Australian Competition Tribunal (ACT).
The proposal was given the green-light on Tuesday when Federal Court judge and tribunal president John Middleton delivered the ruling, which stipulates that Tabcorp must divest its Queensland-based Odyssey Gaming Services. Tabcorp has already agreed to sell the gaming machine monitoring business to Tasmania hotel and gaming company, The Federal Group, once the merger goes ahead.
Rather than look to the Australian Competition and Consumer Commission (ACCC) for approval, which along with rival betting companies and Racing Victoria, objected to the proposal, Melbourne-based Tabcorp headed straight to the tribunal. Justice John Middleton, however, found that the merger would “likely result in substantial public benefits,” and that the public detriments noted by corporate bookmakers and the ACCC were unlikely to arise or of no significance.
With the exception of Racing Victoria, all of Australia’s racing states supported the merger, according to The Sydney Morning Herald.
Justice Middleton said in his findings, “The tribunal is satisfied in all the circumstances that the proposed merger would result, or would be likely to result, in such a benefit to the public that the acquisition should be allowed to occur.”
ABC Online reports that together, the merged companies will control 90 percent of the country’s total betting and produce more than $5 billion in revenues. Tabcorp reportedly told the Australian Securities Exchange (ASE) on Tuesday that it expects the deal to eliminate about $130 million annually in synergies by merging head offices, cutting jobs, and ridding overlapping IT platforms. Welcoming the decision, Paula Dwyer, Tabcorp’s chairwoman, said the step was an important one in creating a diversified entertainment group that is capable of competing globally.
“[It] is expected to deliver significant value for both sets of shareholders and material benefits to other key stakeholders, including Australian racing industries, business partners, employees, customers and governments,” Dwyer said.
Both sets of shareholders are expected to weigh the proposal for approval in August.
ABC Online reports that upon news of the merger, Tatts jumped to $4.32 a 3.6 percent increase, while at the end of the day’s trade, Tabcorp was up a modest 0.4 percent to $4.65.
Having voiced its concern that the megamerger risked diminishing competition for broadcast rights and licenses, the ACCC deferred comment until full reasons for the tribunal’s decision were made public on Thursday.
A spokeswoman for the ACCC said, “The ACCC does not propose to comment until the reasons for decision are public, but notes that the net public benefit test the tribunal was required to apply is different to the substantial lessening of competition test the ACCC undertakes in its informal merger clearance process,” according to local media.